Internet advertising network BlueLithium Inc., barely a year old and already profitable, plans an aggressive expansion with $11.5 million in new venture funding, which the company believes is enough to carry it through to an initial public offering next year.
The San Jose, Calif.-based startup's founder, Gurbaksh Chahal, said WaldenVC of San Francisco and 3i Group plc of London led the new round, which it expects to announce Monday, Feb. 28. Chahal said about 20 potential venture investors approached him by the fourth quarter of 2004, and received multiple competing offers to fund the company.
"We were able to be very selective of which venture firms to choose," Chahal said. WaldenVC and 3i Group contacted the startup separately, he added, after which he brought the two firms together. Although BlueLithium initially intended to raise about $7 million, Chahal said the company and its investors expanded the oversubscribed round to satisfy all participants.
Founded 14 months ago by Chahal, the former chief executive of ClickAgents.com Inc., an advertising technology developer acquired in 2001 by ValueClick Inc. of Westlake Village, Calif., BlueLithium released its first product almost immediately. Chahal would not give a valuation for the startup, which did not retain financial advisers. Bob Latta of Wilson Sonsini Goodrich & Rosati of Palo Alto, Calif., provided counsel.
The new round will support the startup's planned global sales expansion initiative, including additional offices in the U.S. and a presence in the U.K. Chahal said the startup, which achieved positive cash flow in April 2004, is likely to remain profitable throughout its impending growth stage, and could go public as soon as 2006.
He added that the company is currently more interested in pursuing an IPO rather than a different exit strategy such as an acquisition.
According to BlueLithium, the company's databases and algorithms allow advertisers to target potential customers more efficiently than most other online advertising technologies. BlueLithium generates about 90% of its sales through existing agencies, rather than through marketing directly to customers.
The company's technology offerings grew rapidly with the acquisition of New York-based AdRevolver Inc. in November. Chahal said the acquisition gave BlueLithium a technology platform that made its original software product significantly more powerful.
Chahal said BlueLithium plans to add offices in Los Angeles and Chicago, as well as strengthening its team in New York. The startup will also open a London office. "The U.K. is the country which we see having the fastest growth in Europe for online advertising," Chahal said.
He said the online advertising industry in general expects double-digit growth this year. But he expects even better growth for BlueLithium based on aggressive growth efforts. Chahal said revenues are doubling each quarter, and that he expects its revenues to grow by as much as 700% in 2005.
The company's most direct competition lies with Advertising.com Inc. of Baltimore, which was acquired by America Online Inc. of Dulles, Va., a subsidiary of Time Warner Inc. of New York, in June for $435 million. Chahal said Advertising.com's growth is likely to slow down due to its acquisition, and that BlueLithium could be nearly as large a company as Advertising.com by 2006.